Flooding costs extra £75m for insurer

Norwich Union insurer Aviva today added another £75 million to its estimate for claims stemming from last summer's flooding crisis.

The group said the bill for adverse weather costs in 2007 now stood at £475 million after its general insurance business came to the aid of 45,000 households and 6,000 businesses in June and July last year.

The update came as Aviva reported record levels of business in the UK, with life and pension new business sales up 5 per cent to £11.6 billion in 2007.

The weather-related claims have impacted on the group's profitability, underlined by a deterioration in its combined operating ratio.

The key industry measure highlights the amount of money paid out on claims and in costs for every £1 of premiums taken in. Aviva said it expected its ratio to be around 100 per cent in 2007, rather than the 95 per cent it would have achieved if the exceptional weather had not occurred.

Aviva set itself a target of 98 per cent at the start of the year.

As well as the flooding in June and July, insurers also took a hit from storm-related damage in January of last year. Operating profits across the whole Aviva business fell 8 per cent to £1.54 billion in the first six months of 2007.

The group said in the summer it planned to raise home insurance premiums by an average of 10 per cent, although this was not a blanket rise.